1. Pacific Northwest Natural Gas Market and LNG Developments Dan Kirschner, Executive Director, Northwest Gas Association Pacific Northwest Waterways Association Mid-Year Meeting Salishan Lodge June 22, 2006

2. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. Intermountain Gas Co. NW Natural Puget Sound Energy Duke Energy Gas Transmission Terasen Gas TransCanadas GTN System Williams NW Pipeline

3. 3 Gas a Vital Part of NW Energy Scene

4. 4 Recent Gas Demand *2005 BC estimated from preliminary StatCan data

5. 5 Proportion of Gas Demand by Sector - 2005

6. 6 Gas Demand Forecast (2006-07 through 2010-11) Low Growth CaseBase (expected) CaseHigh Growth Case Average Annual CumulativeAverage Annual CumulativeAverage Annual Cumulative Total1.0%4.1%2.1%8.1%2.7%10.2% Residential1.9%7.3%3.2%11.9%4.2%15.2% Commercial1.3%4.9%2.5%9.3%3.1%11.5% Industrial0.0%0.1%0.5%2.0%0.6%2.4% Generation1.1%4.1%2.6%9.7%3.2%11.9%

7. 7 Demand Forecast

8. 8 Demand Forecast by Sector

9. 9 Source: Platts Gas Daily and EIA Natural Gas Weekly Update The Good News (but for how long?)

10. 10 Price Drivers: Production Source: Baker Hughes, 06/09/2006

11. 11 Price Drivers: Storage (Supply) Source: EIA, 06/15/2006

12. 12 Recent Gas Prices Source: EIA

13. 13 The Price of Oil Has an Impact… Source: EIA

14. 14 Source: Energy Information Administration As Does the Weather Hurricane Katrina landfall August 29, 2005 Hurricane Rita landfall September 24, 2005

15. Productive Capacity Source: Energy and Environmental Analysis, Inc. Bubble Tight Market

16. 16 Production per Rig Source: EIA, Baker Hughes Rotary Rig Counts

17. 17 Northwest Gas Supply Sumas Kingsgate AECO Stanfield Malin Western Canadian Sedimentary Basin Station 2 Rockies Basins Opal

18. 18 WCSB Production

19. 19 Rockies Production

20. 20 Supplies Flow to Demand

21. 21 Growing Demand, Slowing Supply

22. 22 Why LNG? Large reserves with little or no local market. Pipelines to markets impractical (Source: BP Statistical Review of World Energy, 2005) CountryProved Reserves (Tcf) Russia1,694 Qatar910 U.A.E.214 Nigeria176 Algeria160 Venezuela149 Indonesia90 Australia87 Norway84 Malaysia87 Egypt66 Libya53 Oman35 Trinidad/ Tobago19

23. 23 LNG enables long distance shipping Liquefying natural gas: Super-chilling it to -260°F Reduces volume of gas 620 times LNG weighs less than one-half that of water

24. 24 It Must Make Economic Sense Total = $2.00 - $3.70/MMBtu (Source: Center for Energy Economics)

25. 25 Pacific Basin Sources of LNG Peru LNG Bolivia LNG Sunrise Browse Basin Scarborough Australia NWS 5 Kenai Sakhalin Gorgon Darwin LNG Australia NWS 1-4 Iran Bintulu Arun Brunei Tangguh Oman Abu Dhabi Qatar Donggi Bontang Investment in new LNG liquefaction capacity is growing Existing/Under Construction Proposed Yemen

27. 27 PortWestward LNG Skipanon LNG Jordan Cove LNG „Northern Star LNG …Tansy Point †Kitimat LNG ‡WestPac Terminal Challenges include: Local acceptance Regulatory/Permitting Commercial considerations: economics/financing takeaway infrastructure worldwide competition supplier commitment Northwest LNG Proposals

28. A Bit About Process… FERC is lead agency; consults w/state agencies USCG serves as subject matter expert for maritime safety and security for EIS USCG validates Waterways Suitability Analysis (WSA) Provide USCG and Maritime Stakeholder input USCG issues Letter of Recommendation (LOR)

29. 29 Waterways Suitability Analysis Risk-based analysis: Identify risks that arise from introduction of LNG operations into port What can go wrong? What is the likelihood? How severe are consequences? The goals: Understand individual risks in terms of: probabilities, threats, vulnerabilities, consequences Use info to develop effective risk management strategies

30. 30 WSA Includes: Transportation through the vessels arrival in US waters to LNG facility Navigation and environmental safety issues Safety and security issues that might affect entire port; detailed review of specific points of concern

31. 31 Conclusions Gas a critical part of NW energy mix NW demand is growing Gas-fired generation continues to be important Volatile commodity prices: tight supply/demand balance Production struggling to match growing demand NW part of integrated N. American market Increased LNG imports a vital component of energy portfolio; will help dampen volatility LNG imports must make economic sense Regulatory processes are comprehensive and rigorous NW projects making progress; still a ways to go

32. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. Intermountain Gas Co. NW Natural Puget Sound Energy Duke Energy Gas Transmission Terasen Gas TransCanadas GTN System Williams NW Pipeline